Asymmetric effects of monetary policy with or without Quantitative Easing: Empirical evidence for the US

Several rounds of Quantitative Easing since the financial crisis of 2008 have resulted in very large expansions in the monetary base of the US and other economies. This paper asks whether the effects of Quantitative Easing are subject to the asymmetries that have been established for more conventional monetary policies. Using US quarterly data from the 1950-2011 period, monetary base shocks and their effects on real GDP and industrial production are estimated. First, the paperʼs findings strongly support sign asymmetry: with or without Quantitative Easing, monetary base contractions have larger effects than monetary base expansions (the effects of which are often statistically insignificant). This characterizes both permanent and temporary (four-year) shocks to the monetary base. Second, there is also evidence of size asymmetry: the effectiveness of monetary base shocks declines with their size. Size asymmetry is found for both positive and negative monetary base shocks, but it appears to be stronger for negative shocks.